By keeping these three basic principles on top of mind when operating and funding your business, you can spare yourself a lot of unnecessary stress and potential litigation risk when you:
- Keep (and treat) your business accounts as completely separate from your personal spending accounts – in simple terms, don’t divert or spend your business’s income or assets on your personal liabilities or expenditures – you also need to be able to separately track and account for the business’s income and expenditures
- Don’t EVER misrepresent your business’s assets or ability to pay debts to your creditors, especially in order to induce them to extend credit or to defer taking action to collect debts from your business – this is doubly so if you are an officer of the business or a person in authority speaking on behalf of the business – since you may become personally liable for fraudulent misrepresentations, and these may NOT be dischargeable in Chapter 7 bankruptcy
- Make sure that your business is “adequately capitalized” – in simple terms, don’t knowingly run up business debts beyond the company’s available assets or its ability to cover those debts
If you find yourself exposed, or feel that someone else might be liable to you for failing to respect the Corporate Veil, please contact your attorney or reach out to me at firstname.lastname@example.org – I have successfully represented numerous businesses and corporate officers on both sides of this question.